Cash Flow Strategies for Contractors
As the construction market continues its slow recovery, now is a good time to review your cash flow strategies. Questions to consider:
- How much bad debt can my company absorb before having a critical impact on my balance sheet and cash flows?
- Who bears the risk of non-payment by the ultimate project owner? Do I have any “Pay If Paid” contracts?
- How is this private project being financed? Has anyone seen a bank commitment letter?
- What would happen if my receivables were stretched another 30-45 days on average?
- What is my added exposure when I bond a job?
- How do I know if my subcontractors are still financially viable?
- How long should I perform work without being paid? What does my contract allow for in terms of work stoppages for non-payment?
For companies that rely on bonding to secure work, a strong surety relationship can be a key competitive advantage. Do your homework before signing a contract.
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